AskDefine | Define neoliberalism

Dictionary Definition

neoliberalism n : a political orientation originating in the 1960s; blends liberal political views with an emphasis on economic growth

User Contributed Dictionary



From neo- + liberal + -ism.


  1. A political movement that espouses economic liberalism as a means of promoting economic development and securing political liberty.

Extensive Definition

Neoliberalism is a political movement that espouses economic liberalism as a means of promoting economic development and securing political liberty. The movement is sometimes described as an effort to revert to the economic policies of the 18th and 19th centuries classical liberalism. Strictly in the context of English-language usage the term is a syllabic abbreviation of "neoclassical liberalism", since in other languages "liberalism", minus any modifier such as "social" (as in social liberalism), has more or less retained its classical meaning.
This term should not be confused with new liberalism.


Neoliberalism refers to a historically-specific reemergence of economic liberalism's influence among economic scholars and policy-makers during the 1970s and through at least the late-1990s, and possibly into the present (its continuity is a matter of dispute).
In many respects, the term is used to denote a group of neoclassical-influenced economic theories and right-wing libertarian political philosophies which believe that government control over the economy is inefficient, corrupt or otherwise undesirable. Neoliberalism is not a unified economic theory or political philosophy — it is a label denoting an apparent shift in social-scientific and political sentiments that manifested themselves in theories and political platforms supporting a reform of largely centralized postwar economic institutions in favor of decentralized ones. Few supporters of neoliberal policies use the word itself.
Neoliberal arguments gained a great deal of support after the Stagflation Crisis of the 1970s, the Developing World Debt Crisis of the 1980s (which primarily affected Latin America but was felt elsewhere), and the Soviet Collapse of the early-1990s.

Policy Implications

Broadly speaking, neoliberalism seeks to transfer control of the economy from the public to private sector. The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's "Washington Consensus", a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the IMF and World Bank). Williamson's list included ten points:


Before Neoliberalism

Arguments that stress the economic benefits of unfettered markets, in line with neoliberalism, first began to appear with Adam Smith's (1776) Wealth of Nations and David Hume's writings on commerce. These writings were directed against the Mercantilist ideas that had been dominant during the previous centuries, and served to guide the policies of governments throughout much of the 19th century.
Nevertheless, statist ideas slowly began to regain a following amongst the intellectuals that had rejected them during the early Enlightenment. State interventionism increased towards the end of the 19th century; in the United States the Progressive Era saw an accelerated movement to re-institutionalize government controls over the economy.
With an intellectual and political foundation in place, the onset of the Great Depression and the rapid industrialization of the Soviet Union led to increased support for government economic control as a means of securing rapid industrialization. By the end of World War II, many countries decided to expand their governments dramatically.
Across much of the world, the work of John Maynard Keynes, which sought to formulate the means by which governments could stabilize and fine-tune free markets, became a highly-influential ideology. Within the developing world, several developments – among them decolonization, a desire for national independence and the destruction of the pre-war global economy, and the view that countries could not effectively industrialize under free market systems (e.g., the Prebisch-Singer hypothesis) – encouraged economic policies that were influenced by communist, socialist and import substitution precepts.

An Economic Golden Age

The period of government interventionism in the 1950s and 1960s was characterized by exceptional economic prosperity, as economic growth was generally high, inflation was contained, and economic distribution was comparatively equalized. This era is known as les Trente Glorieuses ("The Glorious Thirty [years]") or "Golden Age", a reference to many countries having experienced particularly high levels of prosperity between (roughly) WWII and 1973.

The System Collapses

By the late-1960s, however, the statist systems that had been instituted during the 1930s showed strains. Some of these strains can be located in the international financial system., and culminated in the dissolution of the Bretton Woods system, which some argue had set the stage for the Stagflation crisis that would, to some extent, discredit Keynesianism in the English-speaking world. In addition, some argue that the postwar economic system was premised on a society that excluded women and minorities from economic opportunities, and the political and economic integration given to these groups strained the postwar system.

The Chicago School

The policies that would be enacted by those like Pinochet, Thatcher and Reagan would in part rest on the intellectual victories of Chicago School theorists under the leadership of Milton Friedman.

Pinochet's Chile

An often-cited early implementation of neoliberal policies followed in the Chilean president Augusto Pinochet's coup d'état. Pinochet's coup took place in the context of a US-sponsored economic crisis under the democratically elected government of Socialist Salvador Allende. After Allende won, Henry Kissinger told CIA director Richard Helms it would be necessary to "make the [Chilean] economy scream" which he proceeded to do by paying truck drivers to strike so that food could not reach many parts of the country After Pinochet seized power, the so-called Chicago Boys, members of the Pontifical Catholic University of Chile who had strong ties to Chicago School economists, began closely advising the dictator in the implementation of a number of neoliberal reforms. . Detractors of Pinochet's regime have argued that the human costs in the form of torture and disappearances were instrumental in the implementation of neoliberal policies.

Thatcher's Britain

Margaret Thatcher was Britain's Conservative Prime Minister between 1979 and 1990. Thatcher was elected to the Prime Minister's office while the British economy stagnated. She, along with fellow Conservative Keith Joseph, sought to resolve these problems through the dismantling of Britain's elaborate government economic controls, taking a tough stance against Britain's unions following the so-called Winter of Discontent of 1978-1979, and by the prioritization of inflation control.

Reagan's America

The Administration of Ronald Reagan governed from 1981 to 1989, and made a range of decisions that served to liberalize the American economy. In 1981, he fired over 11,345 striking air traffic control workers and banned them from future civil service, resulting in the de-certification of the Air Traffic Controllers union later that year. These firings heralded a period of long decline for American unions, which served as a strong political counterweight to business and other interests that traditionally support liberalization. He is also credited with policies that cut taxes for those perceived as wealthy (which was said to help the economy via trickle-down effects). He is also often credited with having deregulated much of the American economy, though the 'deregulation' movement preceded his Administration, and continued after it.
These policies are often described as Reaganomics, and are often associated with supply-side economics (the notion that policies should appeal to producers, in order to lower prices, and therefore make products more affordable, rather than consumers, in order to cultivate economic prosperity).
The Reagan administration is credited with overseeing a recovery from the Stagflation crisis of the 1970s and America's victory in the Cold War.


In Canada, these policies are often associated with Paul Martin, Jean Chrétien, Brian Mulroney, Gary Doer, Mike Harris and Gordon Campbell.


In Australia, these policies were originally associated with the Hawke/Keating governments led by Prime Minister Bob Hawke and his Treasurer and later also PM Paul Keating from 1983 to 1996.

New Zealand

In New Zealand, these policy changes are often attributed to Roger Douglas the minister of Finance in the Fourth Labour Government, and are commonly referred to as Rogernomics. Roger Douglas was, and still is a controversial figure in New Zealand politics. He planned to create a 15% flat tax in New Zealand, and to privatise schools, roads and hospitals, which was moderated by the Labour cabinet at the time, although the resultant reforms were still generally considered radical in a global context. After Douglas left the Labour party, he went on to co-found ACT in 1993, which regards itself as the new liberal party of New Zealand. He also recently grabbed headlines by claiming that every other party in New Zealand was 'socialist'.

Global Spread

Chronic economic crisis throughout the 1980s, and the collapse of the Communist bloc at the end of the 1980s, helped foster political opposition to state interventionism, and in favor of free market reform policies.

Reach and Effects

Neoliberal movements ultimately changed the world's economies in many ways, but some analysts argue that the extent to which the world has liberalized may often be overstated. Some of the past thirty years' changes are clear and unambiguous, like:
  • Growth in international trade and cross-border capital flows
  • Elimination of trade barriers
  • Cutbacks in defense spending, although it is unclear whether these reductions are associated with neoliberalism or the peace dividend that was supposed to accrue at the end of the Cold War
  • Cutbacks in public sector employment
  • The privatization of previously public-owned enterprises
  • The transfer of the share of countries' economic wealth to the top economic percentiles of the population.
Other changes are not so apparent, and are debated in the literature:
  • Reduction in the size of governments. Governments do not appear to have shrunk wholesale. With the exception of exceptionally high-spending governments, government expenditures (as a percentage of GDP) appears to have stayed the same since 1980. Most of the cuts to government spending appear to have been a temporary phenomenon that took place during the 1990s.
  • Social welfare spending. Many governments have generally spent more on health, education, social security, welfare and/or housing. However, populations have increased and populations have aged in affluent countries. As well, some of these services (such as health care and education in the U.S.) are also very inefficiently organized, due to neoliberal policies adumbrated above. Vestigal social welfare can be more expensive than strong institutions that support social citizenship.


  • Anti-sovereignty -- globalization and liberalization is often argued to have subverted nation's ability for self-determination
  • Exploitation -- neoliberalism has coincided with a rise in human trafficking, many multinational enterprises have been found to have outsourced jobs away from markets in which laborers (and children) are protected to those that are not (this is also blamed on minimum wage laws)
  • Environmental costs. More transportation, more industrial production in unregulated markets


"The standard neoliberal policy package includes cutting back on taxes and government social spending; eliminating tariffs and other barriers to free trade; reducing regulations of labor markets, financial markets, and the environment; and focusing macroeconomic policies on controlling inflation rather than stimulating the growth of jobs," reports economist Robert Pollin (2003). Arising out of a rejection of the class compromises embedded in previous liberal political-economic policies, including Keynesian and Active Labour Market Policies (ALMPs), neoliberal theory, institutions, policies, and practices are not regarded as politically neutral by their opponents. Their criticisms of neoliberalism are often historical materialist, bringing inequality into sharper focus.
Economists remind us that free markets are theoretically efficient, not that they are considered fair by all people, and this distinction is a foundation of the critique of neoliberalism. Opponents critique neoliberalism's effects on wages, working class institutions, inequality, social mobility, working class well-being, health, the environment, and democracy.
Notable opponents to neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin, linguist Noam Chomsky, geographer David Harvey,, sociologist Patrick Hunout, and the anti-globalization movement in general, including groups such as ATTAC. Critics of neoliberalism and its inequality-enhancing policies argue that not only is neoliberalism's critique of socialism (as unfreedom) wrong, but neoliberalism cannot deliver the liberty that is supposed to be one of its strong points. Daniel Brook's "The Trap" (2007), Robert Frank's "Falling Behind" (2007), Robert Chernomas and Ian Hudson's "Social Murder" (2007), and Richard G. Wilkinson's "The Impact of Inequality" (2005) catalogue why high inequality spurred by neoliberal policies produces profound political, social, economic, political, health, and environmental constraints and problems. The economists and policy analysts at the Canadian Centre for Policy Alternatives (CCPA) offer inequality-reducing social democratic policy alternatives to neoliberal policies. In addition, a significant opposition to neoliberalism has grown in Latin America, a region that has been a target of neoliberal policies. Prominent Latin American opponents include the Zapatista Army of National Liberation rebellion, and the governments of Venezuela, Bolivia and Cuba.
Critics of neoliberalism view neoliberalism as both an economic and political project aimed at reconfiguring class relations in societies. Many core countries' middle class and labor aristocracy families have become constrained by the cascading costs of conspicuous consumption goods and services, finding themselves losing radical amounts of time once free for personal development, recreation, family, community, and citizenship. Moreover, workers have been so heavily disciplined by capital and the capitalist state that, as Alan Greenspan said, they are "traumatized" and unable to politically moderate capitalist aggression. Daniel Brook's "The Trap: Selling Out to Stay Afloat in Winner-Take-All America" (2007) describes the anti-democratic effect of decreased middle class welfare. The massive U.S. military-industrial complex adds an extra layer of repression to working class "traumatization," according to David Harvey (2005), making resistance and inequality-reducing policy innovation seem unfeasible to most workers. A "traumatized" working class allows the capitalist class absolute reign, which Harvey claims – citing the economic crises of 1873 and the 1920s – to be disastrous for economies around the globe, states, and working class people; though, he points out, on average capitalists were not negatively impacted by these crises.
Critics of neoliberalism sometimes refer to it as the "American Model," which they find promotes low wages and high inequality. According to the economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30% of workers earn "low wages" (less than two-thirds the median wage for full-time workers), and 35% of the labor force is "underemployed"; only 40% of the working age population in the U.S. is considered adequately employed. The Center for Economic Policy Research's (CEPR) Dean Baker (2006) has shown that the driving force behind rising inequality in the United States has been a series of deliberate, neoliberal policy choices including anti-inflationary bias, anti-unionism, and profiteering in the health industry. However, countries have applied neoliberal policies at varying levels of intensity; for example, the OECD has calculated that only 6% of Swedish workers are beset with low wages. John Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility" than all the continental European countries for which data is available.
Critics of neoliberalism examine the political foundations of the neoliberal project as well as its economic foundations. One of the most famous moments in neoliberal political history occurred when then-U.S. President Ronald Reagan's advisers had him deregulate the thrift industry. This was promoted with the claim that a gigantic bonanza of growth and investment was sure to follow. Reagan signed the deregulation bill in 1982, saying, "All in all, I think we've hit the jackpot." Columnist Joe Conason has argued that "The best reckoning of the costs of his benign intentions is a trillion dollars." While Reagan and the United Kingdom's Margaret Thatcher laid the groundwork for working class demobilization, through eliminating collective assets by discounted sales to the private sector, enacting policies to diminish labor unions, and promoting militarization, other politicians have steadily continued the neoliberal tradition.
According to Pollin (2003), neoliberalism under the U.S. Bill Clinton administration – steered by Alan Greenspan and Robert Rubin – was the temporary and unstable policy inducement of economic growth via government-supported financial and housing market speculation, featuring low unemployment, but also low inflation. This unusual coincidence was made possible by the disorganization and dispossession of the American working class. Santa Cruz history of consciousness professor Angela Davis has argued and Princeton sociologist Bruce Western has shown that the astonishingly high rate of incarceration in the U.S. (1 out of every 37 American adults is in the prison system), heavily promoted by the Clinton administration, is the neoliberal U.S. policy tool for keeping unemployment statistics low, and stimulating economic growth through maintaining a contemporary slave population within the U.S. and promoting prison construction and militarized policing. The Clinton Administration also embraced neoliberalism by pursuing international trade agreements that would benefit the corporate sector globally (normalization of trade with China for example). Domestically, Clinton fostered such neoliberal reforms as the corporate takeover of health care in the form of the HMO, the end of welfare protections, and the implementation of Workfare.
Harvey (2005) sums up neoliberalism as a global capitalist class power restoration project. Neoliberalism, he explains, is a theory of political-economic practices that dedicates the state to championing private property rights, free markets, and free trade, while deregulating business and privatizing collective assets. Ideologically, neoliberals promote entrepreneurialism as the normative source of human happiness. Harvey also considers neoliberalization a form of capitalist "creative destruction," a Schumpeterian concept. This indicates that while neoliberalism is a critical concept with a critique of capitalist class relations, it is not strictly a Marxist concept; the Marxist term for neoliberalism is "primitive accumulation."
Harvey (2000) observes that neoliberalism has become hegemonic world-wide, sometimes by coercion. Neoliberalism has had the support of large debt restructuring organizations such as the World Bank and the International Monetary Fund (IMF), which were encouraged to promote neoliberalism in order to revitalize capital accumulation. Opponents of neoliberalism argue that neoliberalism is the implementation of global capitalism through government/military interventionism to protect the interests of multinational corporations. Even neoliberal proponent Thomas Friedman has argued approvingly, “The hidden hand of the market will never work without a hidden fist." In its commitment to belligerent capitalism, neoliberalism is linked to neoconservatism.

European and Latin American

Neo-liberalism and globalization are considered to be related to one another. While generally theorists understand neoliberalism as the contemporary version of capitalist expansionism, linked to shifting global power and restoring profit rates, some theorists argue that the terms "globalization" and "neoliberalism" must be rigorously separated and that culture should be the primary lens through which the concepts are understood. “Free markets and global free trade are not new, and this use of the word (neoliberalism) ignores developments in the advanced economies…Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism.”
One Euro-Latin American tradition critical of neoliberalism contributes a perspective focusing on how neoliberalism becomes embedded in habitus, as where German author Paul Treanor argues that the ideas brought about from neo-liberalism (and neo-liberalism itself) are more of a philosophy and should not be perceived as just an “economic structure”. For example, a neo-liberal would perceive the world in a “term of market metaphors” and when members of a society commonly refer to countries as companies, that civilization would then be deemed neo-liberal instead of a liberal culture. Yet Treanor also recognizes continuity between historical liberal and neoliberal cultures. “(W)hen this is a view of nation states, it is as much a form of neo-nationalism as neo-liberalism. It also looks back to the pre-liberal economic theory- mercantilism-which saw the countries of Europe as competing units. The mercantilists treated those kingdoms as large-scale versions of a private household, rather than as firms. Nevertheless, their view of world trade as a competition between nation-sized units would be acceptable to modern neo-liberals.”
Two of Treanor's collaborators, Elizabeth Martinez and Arnoldo García, find that neo-liberalism is a collection of economic policies that has spread its ideals from country to country over the last 25 years. They argue it is clear to see that neo-liberalism treats its poorest citizens badly allowing for the rich to get richer and the poor to get poorer. Highlighting ideology, Martinez and Garcia explain the difference between neoliberalism and liberalism with reference to liberalism's association with class compromising ideology. “"Liberalism" can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right-wing.” However, as Frances Fox Piven and Richard Cloward (1997) show, the liberal social contract was broken by the elite political movement that included neoliberalism in the U.S.
Cuba has played a role in supporting working class and peasant resistance and sustainable alternatives to neoliberal reforms and culture. General Secretary Pedro Ross informed the members of the International meeting of Workers and Unions against Neo-Liberalism and Globalization conference, “The international workers' movement is in a condition to pass to the offensive and take up its responsibility to defend the rights of the working class, the poorest, and the most marginalized by neo-liberalism.” The meeting called for an 8 page document in regards to how to "fix the situation" in Cuba, and the last days of the conference were dedicated to discussing the proposed actions that were to take place. Cuban National Assembly President Ricardo Alarcon said that Cuba survives because it embodies something that for its enemies is "too intricate" to acknowledge. He lifted the spirits of the members of the conference, declaring, “We are waging a battle on behalf of all the people of the world…Please have no doubts that this small country will be capable of continued resistance.”
Reviews such as “Cuba in the Age of Neo-liberalism,” by Raul Fernandez (reviewing Antonio Carmona Baez’s “State Resistance to Globalization in Cuba”) show how Cuba has become a much stronger economy and society because of its socialist resistance to neoliberal reform. Fernandez explains the ways in which the leaders of Cuba were successful in refusing to agree to the coercion of neo-liberal globalization, and how they were able to preserve the economic independence and self-determination of Cuba. His review discusses the progression of the Cuban economy in the years after the dissolution of the Soviet bloc and the demise of Cuba’s dependence on the economies of Eastern Europe. Through his book, Baez “emphasizes the home-grown character of the (socialist) movement (in Cuba), and contrasts it with the experience of Eastern Europe...” After the fall of the Berlin Wall, neoliberal pundits predicted the termination of Castro and his socialist government. However, the impression that Cuba left on the world after surviving extreme economic and geopolitical pressures, including the United State’s economic blockade of Cuba, was both “surprising and remarkable.” The socialist sustainability policies that the Cuban government put into place throughout the 1990s are the reason why Cuba survived the neo-liberal ambush where other societies did not.

Arguments Favoring Neoliberalism

  • Free markets are important to securing political freedom (e.g., Hayek, Friedman)
  • Many developing countries' governments had mismanaged or exploited their economic dominance during over the mid-century
  • Many government attempts to micro-manage their economies using things like tariffs, public investment, etc. were often misdirected, poorly timed, poorly implemented and bore undesirable, unanticipated consequences. Many scholars doubt that a government is capable of managing a social system as huge as a national economy
  • Market liberalization is supposed to spur investment, technology transfer, innovation and a responsiveness to consumer demand
  • Government-owned enterprises and public entitlements were losing a lot of money, and helping bankrupt governments
  • During the 1970s, state-controlled economies proved unresponsive to economic shocks, and much of the world endured a sustained, high-inflation recession until markets were liberalized (though it is important to note that liberalization itself is only one of several explanations for our recent return to prosperity -- other factors include things like technological developments or the end of the Cold War.)

State-centric Neoliberalism

The state-centric approach to neoliberalism is not critical, but it concurs with the critical approach that neoliberal ideas are really just laissez-faire liberal prescriptions that overthrew Keynesianism. State-centric theorists hold that neoliberalism is "the attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization." However, the state-centric approach argues that state actors were the political entrepreneurs who formulated neoliberalism – rather than, as critics of neoliberalism would claim, capitalist political organizations, and economists and economic departments, think tanks, and politicians all supported by class-conscious capitalists. State-centric theorists argue that neoliberalism spread because it fit the voters' preferences best; they disagree in this with the critical approach, which maintains that neoliberal framing and policies were propagated by well-heeled, highly organized political machines that insisted to the public, "There is no alternative". State-centric sociologist Monica Prasad (2006) further argues that neoliberalism became dominant where the (federal) tax structure was progressive, where industrial policy was "adversarial" to business, and where welfare was associated with the poor. She asserts this was the case in the U.S. and U.K., relative to France and Germany. However, in France and Germany, taxation by the national government was regressive, industrial policy favored business, and the welfare state was widely recognized to benefit the middle class; consequently neoliberalism was not as favored by either business or the middle classes in these two countries as it was in the U.S. and the U.K. in particular. Prasad's analysis suggests that neoliberalism has been a corrective to policies that favored the working class over capitalist interests, and it was championed by autonomous state actors. However, most political sociologists would agree that only strained methodological choices would allow U.S. policy especially to be portrayed as favoring the working class over capitalist interests, even in the New Deal; state autonomy theses are generally very vulnerable to more class-sensitive historical research, especially in the case of the U.S.; and methodological choices, such as the omission of social democratic countries from her analysis, contribute heavily to Prasad's conclusions.

Comparison to Other Ideologies

Neoliberalism and social liberalism are both alternative forms of liberalism but with different purposes. Social liberalism is defined by individual and social liberty, whereas neoliberalism is based on economic liberty for those with effective market demand.
Many neoliberals have been defined as neoconservatives and vice versa. They are often allies. One of the main differences between the two groups has to do with level of policy dependence on defence and foreign policy. One of the fundamental pillars of neoconservativism is building defence and police budgets and foreign interventions. The other difference is that neoconservatives see neoliberalism as breaking down social order without replacing it.
Because they both seek to greatly diminish state capacity to reduce inequality, the term libertarian has also been used to define neoliberals. But there are key differences between the two groups. Libertarians believe in reducing government to the roles delineated by the Federalists in the U.S. Constitution (defense, courts, protection of property, enforcement of contracts, and individual rights). Though they often work to eliminate government programs that may reduce inequality, neoliberals do not seek to reduce government, as government is a key institution in maintaining the conditions for wealth accumulation. Neoliberals may seek to invest in healthcare and education, if these benefit the regional capital accumulation strategy, or they may seek to invest heavily in incarceration, policing, and defense industry to maximize capital accumulation. There is also a difference on social issues. Libertarians are generally very liberal on social issues, since they all support individual liberties. Neoliberalism is more neutral on issues of social liberalism.


  • Bowles, Samuel, David M. Gordon, and Thomas E. Weisskopf. 1989. "Business Ascendancy and economic Impasse: A Structural Retrospective on Conservative Economics, 1979-87." Journal of Economic Perspectives 3(1):107-134.

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